A Clear and Concise Communique from Washington D.C Meetings

Ussal Şahbaz

TEPAV

22/04/2015

The Turkish G20 Presidency hosted the second finance ministers’ meeting in Washington D.C. last week. The first meeting was held in Istanbul on February 9th and 10th. The communiqué from that meeting was criticized as having “a clear disconnect [with] a vision that will allow the G20 to achieve all of the Turkish presidency's three I's (investment, implementation and inclusiveness)”. The Washington D.C. communiqué, I would argue, has closed this disconnect. There are still areas for improvement, but overall the communiqué is a clear and concise communication of some of the key messages of the Turkish presidency.

As the Antalya Summit approaches, the global economic context is changing. When the G20 was elevated to leaders’ level after the global financial crisis in 2008, emerging market economies were growing while developed markets were in acute crisis. The contrast between emerging and developed economies is not that clear now. The BRICS economies are not growing at the same pace that they previously were. Some, like Russia and Brazil, are actually sliding into recession. Global economic growth depends on American and Chinese demand.

The G20 communiqué has done a good job in acknowledging this new context including uneven and slow growth that poses significant risks to the global economy.

The communiqué has also made some headway in relation to the Turkish Presidency s three "I"s – inclusiveness, implementation and investment.

First, on the “investment” priority, the communiqué introduced the idea of national investment plans. These will be prepared until the September finance ministers’ meeting and submitted to leaders at the Antalya summit. The plans are envisioned to complement the Brisbane growth strategies.

Second, on implementation, Turkey is developing a monitoring and accountability framework to ensure countries are implementing their respective growth strategies. Finance ministers agreed to prepare accountability reports that will be submitted to leaders at the Antalya summit.

Third, on “inclusiveness”, arguably the most controversial is among the three “I”s, there was partial success. The focus with this priority is on small and medium-sized enterprises (SMEs) and low-income developing countries (LIDCs). Turkey successfully put SMEs into the investment agenda, and also got endorsement for its legacy project, the World SME Forum.

On LIDCs, consideration of the Addis Ababa Conference on Financing for Development (FFD), the New York Summit on the post-2015 development goals (SDGs), and the Conference of Parties 21 (COP21) in Paris in the last paragraph is positive, but a more detailed agenda is required. It is hard to influence the details of these UN agendas, but G20 can strategically coordinate the three tracks. As a recent Brookings conference concluded, G20 can also provide leadership for setting up mechanisms to implement the targets. The G20 countries can commit SDG implementation with financing plans. G20 can also assume an active role in provision of global funding for SDG implementation, and account for the impact of the spillover of Brisbane growth strategies on other countries. A particular missing link is between the impacts of new proposed investment plans and the SDGs.

As expected, the global governance reform debate was also featured at the meeting. With major G20-member American allies such as the United Kingdom and Australia joining the Shanghai-based Asian Infrastructure Development Bank (AIIB), the global governance debate has entered a new phase. In this new environment, G20 ministers could have gone beyond saying “we continue to urge the United States to ratify the 2010 reforms as soon as possible.”

The AIIB is likely to shake the multilateral development finance space by bringing in new competition. In the Think 20 meeting in Washington D.C., Deputy Prime Minister Ali Babacan noted that the existing World Bank and the regional development banks, and the new AIIB and the BRICS Bank can cooperate inasmuch as they compete. The main concern about the AIIB is its project evaluation standards --financial, social and environmental-- and capacity. Developing project evaluation criteria and capacity is a good area for potential cooperation, and the G20 can take the lead in facilitating this. This facilitation will require a framework of commonly agreed standards, and independently managed joint funds for project design and acceleration. The G20-endorsed World Bank Global Infrastructure Facility was a venture in this framework last year, but with low funding commitments and internal politics, it became similar to any trust fund for project preparation support. Now it is time to consider pushing similar initiatives.